Correlation Between Visa and Peninsula Energy
Can any of the company-specific risk be diversified away by investing in both Visa and Peninsula Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Visa and Peninsula Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Peninsula Energy Limited, you can compare the effects of market volatilities on Visa and Peninsula Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Visa with a short position of Peninsula Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Peninsula Energy.
Diversification Opportunities for Visa and Peninsula Energy
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Visa and Peninsula is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Peninsula Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peninsula Energy and Visa is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Visa Class A are associated (or correlated) with Peninsula Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peninsula Energy has no effect on the direction of Visa i.e., Visa and Peninsula Energy go up and down completely randomly.
Pair Corralation between Visa and Peninsula Energy
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.15 times more return on investment than Peninsula Energy. However, Visa Class A is 6.66 times less risky than Peninsula Energy. It trades about 0.3 of its potential returns per unit of risk. Peninsula Energy Limited is currently generating about -0.09 per unit of risk. If you would invest 30,856 in Visa Class A on December 5, 2024 and sell it today you would earn a total of 5,326 from holding Visa Class A or generate 17.26% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Visa Class A vs. Peninsula Energy Limited
Performance |
Timeline |
Visa Class A |
Peninsula Energy |
Visa and Peninsula Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and Peninsula Energy
The main advantage of trading using opposite Visa and Peninsula Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, Peninsula Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Peninsula Energy will offset losses from the drop in Peninsula Energy's long position.Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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